German wealth managers say German investors are paying for Europe’s crisis

By: | 24 Jan 2012

Wealth managers in Mannheim have given mixed views on the chances of solving the eurozone crisis, but agreed Germany and German investors have paid a high price for the crisis.

Speaking at an event organised by Germany’s Investment Association for Wealth Management Investment Funds (Investmentverbund vermoegensverwaltender Investment Fonds), speakers also agreed a traditional stockpicking long-only equities fund was now of limited use for clients.

They might not have been necessary if the eurozone had not had its debt problems – Neue Vermoegen Asset Management head Gottfried Urban said: “If you take a scenario with company profits and cash positions, and not with the [eurozone] indebtedness, we would have had the Dax at 10,000 or 12,000.”

But given the actual backdrop, long-only equity pickers have had a tough time.

Juergen Dumschat of Aecon GmbH said European investors gave net inflows of €5.4bn to ‘mixed funds’ last year – including the kind of alternative multi-asset funds his colleagues run – in contrast to €70bn outflows from European equities funds, and €44bn out of bond funds.

He predicted wealth preservation products would represent over half of Europe’s 10 most popular funds in three years.

On the positive side, Arne Sand, fund manager at smart-invest Asset Management, noted the annual returns his firm expects from Germany (Dax 30) over the coming 10 years, of 10.9%, was as good as India (10.3%), approaching China (12.6%) and better than the US (6.03%).

He said this was partly because of present valuations.

“Corporate profits and valuations are the deciding factors in future price changes. India is awfully dear, while Germany is awfully cheap.”

Robert Beer, head of Robert Beer Investment, predicted investors over the next 10 years would enjoy risis roughly in line with growth in corporate profits – “and that will be between 7% and 10%”.

Beer’s European large cap fund has beaten the Eurostoxx 50 index over one, three and five years, and made over five times more than that benchmark since launch, and Beer said continuing to take an unemotional approach to investing was key.

“The markets are not all sunshine at the moment but we are working through the crisis solwly,” he said.

Herwig Weise, co-founder of wealth managers Mack und Weise, did not wholly share Beer’s mild optimism. “If states that are half-bankrupt are guaranteeing [loans to] states that are bankrupt, that cannot go on. There is still a big risk of explosion, and if we think we can solve the problem by printing money, we are in a fool’s paradise.”

His multi-asset fund is heavily weighted (29%) in precious metals and fixed income (25%). “Gold is money and nothing else,” he said, quoting JP Morgan.